Gasoline price reforms and household consumption behaviour: Evidence from household-level survey data in Saudi Arabia

In January 2016, as a measure of energy price reform, the government of Saudi Arabia implemented a 50 per cent nationwide increase in gasoline prices of both higher (octane 95) and lower (octane 91) grades. We utilised more than 1800 responses from a nationwide survey designed to study gasoline consumption preferences among residents of Saudi Arabia to investigate the impact of this price reform. Our analysis shows that the January 2016 price hike was responsible for more than 20 per cent drop, on average, in gasoline consumption among residents of the country who used the lower grade, octane 91-type gasoline. However, users of octane 95 surveyed in the post-price-adjustment period consumed 15 per cent more gasoline than those who were surveyed in the pre-adjustment period. Moreover, the estimated demand elasticity decreases with the level of education, while income level tends to be positively associated with higher consumption in the higher-price period than in the lower-price period.